Results
First half year 2015/16

1 April 2015 to 30 September 2015

11 November 2015

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

HO xx-P2

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives
LEHN

SMI

Source: Swissquote Global market shareof 50% in Industry
 Benchmark in service
and product quality
 4 production sites inEurope and Asia
 Sales of CHF 257.8
million in 2014/15

 Continued sales
growth and strongmargins
 Dividend yield >5% ineach year since 2009

 Reinforced investment in innovation
 Solid growth perspectives due to underlying trends
 Strong foothold inChina
 EBIT margin target of
15 to 20%3

1. LEM Applications:
Air Conditioner

B HO xxx-S
1

BA HLSR
2A

1 Central air-conditioning system
2 Room air conditioner

In central air conditioning (1) (and increasingly
residential system (2)), the air is cooled byblowing it over an evaporator filled with arefrigerant. Then the refrigerant is pumped
into a condenser where it releases the heat. Apump or compressor is used to move therefrigerant, and a motor runs the compressor.
Inverters control the motors, which drive thepumps and fans. Robust current
measurement devices like the HLSR models(A) or HO xxx-S models (B) are used to reachthe desired temperature quicker while
consuming less electricity and operating morequietly.

41. LEM Applications:Super Charger Station for Electric Vehicles
A super charger (1) operates using several
400V DC chargers in parallel. 1MW would berequired from the grid (5) if 10 cars werecharged simultaneously. Charging stations
therefore often include a photovoltaic plantwith solar panels (2) and a battery storage
system (4). Stored energy is used to reduceenergy peaks and to best use photovoltaicenergy.

A HO 250-P

2AThe chargers use the HO 250-P (A) tomeasure the DC current while the photovoltaic
inverter (3) uses up to 7 transducers, such as
CASRs, HLSRs and CTSRs to measure DC,
AC and residual currents.

1A
3A
1 Super charger

A

4

2 Solar panels
3 Photovoltaic inverters

54 Battery storage
5 Grid5

1. LEM Applications:Electric Plug-in Car
Sensors (DHAB) measure the units ofenergy available to be consumed. This
information helps to calculate theremaining distance that can be driven
based on the current battery charge.
Other sensors (HAH1) are used tomanage the converter and/or inverter.
The information provided is used toadjust the drive performance to thespeed required by the driver.
1 High-voltage battery
2 Vehicle control unit
3 Charger
A HAH1B DHABC HC5F
D CAB

4 Motor controller
5 Electric motor and transaxle
6 DC/DC converter
7 Electric power steering

61. LEM Applications:
Sewing Machine/Embroidery Machine
47Accuracy and speed of the table movements, aswell as the correct, accurate and regulated
rotation speed of the main axis for the needles
are directly linked to the currents provided to themotor (5) through a servo drive (1). The working
table (7) is moving in horizontal X and Y
directions thanks to linear motors (6) controlled
by two position servo drives (1).

352

661A

1 Servo drives
2 Control unit
3 Head4 Main axis
5 Motor6 Linear motors
7 Working table

Full servo control allows for speed and precision
in industrial sewing/embroidery machines.

A HLSR 10-P

Current transducers (A) are used in each servo
drive to measure two of its three phase output
AC currents. Their accuracy, high performance,high temperature working environment, lowtemperature drift contribute to a very stable,
quick, reactive, reliable and precise system.
7

1. Diverse Target Markets – Diversified Businesses
Businesses

Share of sales
H1 of 2015/16

Green Cars
Conventional Cars

16%

Cyclicality

Macro drivers

Consumer durables

Technology adoption
Fuel savings

Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

High precision
Traction
Renewable energies& power supplies

84%

Drives & welding

Automotive segment
Industry segment

8Agenda
1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

DAHBV292. Business regains momentum in Q2 of 2015/16
In CHF millions, %H1 2015/16

H1 2015/16 vs.
H1 2014/15

Q2 2015/16 vs.
Q1 2015/16

Orders

126.9

+0.2%

+8.5%

Sales

131.6

+0.1%

+13.8%

EBIT

24.9-16.0%+36.7%Net profit

19.8

-7.8%

+23.2%■■■■■

Strong Swiss franc weighs on sales and margins
Continued progress in China
US and Europe supported by steadier economic environment
Appointments of new CFO, General Managers for Automotive andIndustry
One-off cost and balance sheet impact due to going-live of new ERP
systems and organizational changes
102. Innovation Road Map
New product: LF 2010
 Proprietary ASIC for closed loop Hall Effect technology
 High performance, matching fluxgate performance High immunity against surrounding perturbations
 For drives, renewable energies and traction applications■Introduced at least 15 derivatives of recently launched products,
mostly custom-built for specific customer applications■

Secured six patents■

Solid pipeline of new products to be launched in H2 2015/16

Industry112. Net Sales
In CHF millions

In CHF millions, %

300

Sales

275
250
225200

H1 vs. H1
asreportedQ2 vs.
Q1
at constantcurrencies

Industry

110.3

-2.9%

+1.5% +11.7%

Automotive

21.3+18.5%+15.3% +25.6%

Total sales

131.6

+0.1%

+3.4% +13.8%

175■150125

■

100■

75

■

Pick-up of sales in Q2 after slow Q1
2015/16 and Q4 2014/15
Continued sales growth in China
Stronger growth in Automotive segment
Negative currency impact

50
250
11/12

12/13*

13/14

14/15

HY 15/16
12* Restatement following IAS 19R application (pensions)2. Quarterly View
In CHF millions

Book-to-bill ratio
1.2

80
65.0

70

65.1
61.8

70.0
64.7

66.5

1.0

61.1

61.5

57.6

60

61.5
0.8

50
0.6

40
30

0.420

 Sales increased fasterthan bookings in Q2
 Currency impact onsales and bookings
 Market uncertainties
translated into shorter
term bookings
 Book-to-bill ratio stable
at around 1 for the pastquarters

0.2
100.00
Q1
13/14

Q2
13/14

Q3
13/14

Q4
13/14

Q1
14/15

Orders received

Q2
14/15

Q3
14/15

Sales

Q4
14/15

Q1
15/16

Q2
15/16

Book-to-Bill ratio13

2. Industry Segment: Regional Markets

EuropeNorth America
Asia and RoW

40%
48%

In CHF millions, %Sales

Growth
H1 vs. H1

GrowthQ2 vs. Q1

Europe

44.3

-8.8%

+26.4%

N. America

12.6

+6.1%

+9.0%

Asia andRoW

53.4

+0.6%

+1.4%

Total

110.3

-2.9%

+11.7%


11%Strong growth in China
Recovery in Europe and US in Q2
China the biggest single country
Ongoing design-in projects with recently
launched product families

142. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

240

Businesses and Applications

25200
20160
15120

Drives & welding (growth H1 vs. H1: -9%)
 Lower industrial investments
 Won projects with new products
 Maintained market share
Renewable energies & power supplies (+8%)
 Growing investments in renewable energies in
China and India
 Stabilization in North America and market sharewins in Europe

1080

540

00
11/12

12/13*

13/14

14/15

HY 15/16Traction (-7%)
 Stabilization after period with strong growth Solid performance in China
 Little infrastructure investments in Europe
High-precision (+6%)
 Good HVDC business in China
 Seasonal uptick in Europe and North America
15* Restatement following IAS 19R application (pensions)2. Automotive Segment: Regional Markets
In CHF millions, %Sales

Growth
H1 vs. H1Growth
Q2 vs. Q1

Europe1.5+26.6%-11.8%

N. America

9.9+9.4%+15.7%

Asia andRoW

9.8+28.2%+44.5%

Total

21.3+18.5%+25.6%

EuropeNorth America
Asia and Row7%

46%47%

 Focus on Asian and North Americanmarkets
 Benefitted from growth of US vehicleproduction
 New projects with Chinese car
manufacturers
16

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales
2040

1835

1630

Businesses and Applications
Conventional cars (H1 vs. H1: +14%)
 Development in line with the market; stablemarket share Support from growing US vehicle production

1425

1220

108156

Green cars (HEV, EV) (+39%)
 Benefitted from Chinese government supportfor green cars
 Won new projects with Chinese car
manufacturers
 Promising opportunities for new products
developed1045200
11/12

12/13*

13/14

14/15

HY 15/16
17* Restatement following IAS 19R application (pensions)2. Business Development Beijing (China)
SalesProduction■■■

Market share of over 50%
Most important country with 32% oftotal sales■

LEM China increased its #1 position aslargest manufacturing site of the Group(63% of total production, compared to58% in financial year 2014/15)“Made by LEM” quality

In CHF millions

In CHF millions

7016060

14012050100
40803060
2040

102000
11/12

12/1313/1414/15

HY 15/16

11/12

12/13

13/14

14/15

HY 15/1618

2. Business Development in Sofia (Bulgaria)
 Objectives of the site Diversify LEM’s cost-competitive production
 Increase production capacity close toEuropean customers
 Increase natural hedge of operations
 Absorb major part of LEM’s future growth Achievements
 11 Production lines relocated from Japan and Switzerland toBulgaria
 Headcount increased to 146 FTE
 Production represents 8.5% of global output in Q2 of 2015/16
 Introduced a local development team to support production
19Agenda
1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

LA 130/150-P20

3. Financial Highlights
 Robust profitability despite impact of strong Swiss franc Gross margin 45.5% (46.3% in H1 of 2014/15)
 EBIT margin 18.9% (22.5% in H1 of 2014/15)
 Net profit CHF 19.8 million (CHF 21.5 million in H1 of 2014/15)

 Improved key figures in Q2 vs. Q1
 One-time operating expenses for ERP introduction and organizationalchanges Temporarily negative cash flow as consequence of Temporary increase in accounts receivable following strong Q2 sales,going-live of new ERP system, and changes in European organization
 Payment of taxes

21

3. Income Statement
In CHF millions

H1
2014/15

H1
2015/16

ChangeQ1
2015/16

Q2
2015/16

Change

Sales

131.5

131.6

+0.1%

61.5

70.0

+13.8%

Gross margin

46.3%

45.5%

-0.8pt

45.0%

46.0%

+1.0ptOperating expense

-31.3

-35.0

+11.8%

-17.2

-17.8

+3.9%

EBIT

29.6

24.9

-16.0%

10.5

14.4+36.7%Net financial exp.

-1.8

+0.5

N/A

+0.5

-0.0

N/AIncome tax-6.3-5.5-12.1%-2.1-3.4+61.1%Net profit

21.5

19.8

-7.8%

8.9

10.9

+23.2%

22

3. Results by Quarter
In CHF millions

In % of sales

8030%
65.1

70

70.0

61.8
57.6

61.1

65.0

66.5
64.7

61.5

25%

61.5

60
20%
50

4015%

30
10%
205%
1000%
Q1
13/14

Q2
13/14

Q3
13/14

Orders received

Q4
13/14

Q1
14/15

Sales

Q2
14/15

Q3
14/15

Op. ROS

Q4
14/15

Q1
15/16

 Q2 of 2015/16 margin
improvement due tovolume leverage andeasing currencypressure CHF 3.6 million foreignexchange impact on
EBIT margin in H1 of2015/16
 Q1 and Q2 of 2015/16
vs. Q4 of 2014/15 lower
net profit margin due tonon-renewal of one-off
tax effects in Q4

Q2
15/16

Net Profit in % of sales

23

3. Gross Margin
In CHF millions

In % of sales
48%

14047%
120
46%10045%

Gross margin

H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

60.9

59.9

27.7

32.2

46.3%

45.5%

45.0%

46.0%

in CHF millions

Gross margin
in % of sales

44%
8043%
6042%
41%

4040%
2039%
038%
11/12

12/13*

13/14

14/15

HY 15/16

 Decrease of gross margin due to adverse
foreign exchange impact
 Positive impacts on gross margin due tofocus on Raw material sourcing
 Internal productivity
 Relocation to cost-competitive
manufacturing sites
24* Restatement following IAS 19R application (pensions)3. SG&A
In CHF millions

In % of sales
25%

60

SG&A
in CHF millions

50

H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

23.9

27.8

13.5

14.3

18.2%

21.1%

21.9%

20.5%

20%

SG&A
in % of sales

4015%
3010%
205%10 Higher sales and administration expense
due to Organizational changes
 Introduction of new ERP
 Build-up of European logistics anddistribution platform

0%

0
11/12

12/13*

13/14

14/15

HY 15/16
25* Restatement following IAS 19R application (pensions)3. R&D Expense
In CHF millions

In % of sales

168%

R&D
expense

14H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

7.4

7.2

3.7

3.5

5.6%

5.5%

6.0%

5.0%

in CHF millions
126%

R&D
expense10in % of sales

84%

642%

2

 Maintained high investment in R&D for
both segments
 Ongoing renewal of product range withfocus on optimized cost, higher accuracy,
easier integration into customers’ systems
and new functions

0%0
11/12

12/13*

13/14

14/15

HY 15/16
26* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales

60

26%
24%

50
22%
20%
40

EBIT
in CHF millions

EBIT
in % of sales

H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

29.6

24.9

10.5

14.4

22.5%

18.9%

17.1%

20.5%

18%
16%

30

14%
2012%
10%
108%

 Adverse foreign exchange impact; easingin Q2 of 2015/16
 One-time operating expenses
 Continued cost control and high grossmargins
 Profitability within target range of 15 to20%

6%

0
11/12

12/13*

13/14

14/15

HY 15/16
27* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions*H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

Exchange effect*-1.9+0.5+0.5+0.1

Other financial expense &income+0.1-0.1+0.0-0.1

Total-1.8+0.5+0.5-0.0

Exchange effect in Q2 positive (revaluation of EUR and devaluation of CNY)

Foreign exchange hedging policy (unchanged)


EUR: 100% of net exposure 12 months forward

USD: 100% of net exposure 12 months forward

The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking andsettling a receivable/payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at
which each transaction is booked and at which it is consolidated into CHF.

28

3. Income Taxes
H1
2014/15

H1
2015/16

Expected income tax rate
Expected withholding tax rate
Expected tax rate

19.7%
2.6%
22.3%

19.2%
2.1%
21.2%

Other differences

0.3%

0.6%

Effective tax rate

22.6%

21.8%

 Tax rates showing positive impact of transfer to Bulgaria
 Reduction of withholding taxes on dividends from China

29

3. Net Profit
In CHF millions

In % of sales

5020%

Net profit
in CHF millions

4518%

Net profit
in % of sales

40

H1
2014/15

H1
2015/16

Q1
2015/16

Q2
2015/16

21.5

19.8

8.9

10.9

16.3%

15.1%

14.4%

15.6%

16%

H1 2014/1535-1.814%

30-6.329.625

21.5

12%
EBIT

20

Financial expense

Income tax

Net profit

10%158%H1 2015/16

0.5

106%

5-5.5

24.9

19.8

4%

0
11/12

12/13*

13/14

14/15

HY 15/16

EBIT

Financial expense

Income tax

Net profit30* Restatement following IAS 19R application (pensions)3. Balance Sheet Analysis
In CHF millions

31.3.2015

30.9.2015

Net working capital

37.9

58.4

Fixed assets

39.9

39.5

Noncurrent liabilities

-6.8

-8.4

Net operating assets

71.0

89.5

Net cash / (debt)

20.9-26.8Equity

91.9

62.6

65.1%

40.0%

Days of sales outstanding

66

84

Days of inventory outstanding

72

66

Days of payables outstanding

2839

Equity ratio31

3. Cash Flow Statement
In CHF millions

H1
2014/15

H1
2015/16

Profit before taxes

27.8

25.3

Adjustment for noncash items and taxes paid

4.0

-4.8

Cash flow from changes in net working capital

-6.6

-20.0

Cash flow from operating activities

25.2

0.6

Cash flow from investing activities

-3.6

-2.0

Free cash flow

21.6

-1.4

Cash flow from financing activities-33.6-6.1Change in cash and cash equivalents

-12.0

-7.4

Cash and cash equivalents at the end of theperiod

13.3

13.2
32

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

HLSR
33

4. Market Factors and Strategy■ We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on
the drivers of LEM’s markets
through pure play components company
 diversification across geographiesand businesses34

4. Executing Strategy
Strategic priorities
Increase technology leadership■ Reinforce multidisciplinary innovation
team■ Increase number of product launches■ Constantly improve performance ofproducts
Increase efficiency■ Reduce product cost through costcompetitive sourcing and manufacturing■ Reduce complexity of organization
Increase production flexibility■ Develop systems to better forecast
demand fluctuations■ Improve supply chain management

Achievements in H1 2015/16
■
■
■

■
■

■
■

Launched 1 new product and aseries of custom built derivatives
Started development team in Sofia
Closer cooperation with customers

Increased activities in SofiaSimplified supply chain andreduced number of key suppliers
Ongoing deployment of integrated
flexible supply-chain model
Maintained high level of flexibility
and on-time delivery
35

4. Outlook■

For H2 of 2015/16 we expect■■■

Financial year 2015/16 outlook
■
■
■

■

No major change in the global economic environment
Normal seasonal decline because of holiday seasons and lower solar
infrastructure investments during winter months

Volume growth (in number of transducers) in both segments
Sales of CHF 250 – 260 million
EBIT margin to be within the target range of 15 to 20%

International currency fluctuations remain a challenge■Continuous reevaluation of all processes to determine their optimallocation
36

Q&A

37

Financial Calendar and Contact Details
Financial calendar
16 February 2016
9 June 2016
30 June 2016
5 July 2016
7 July 2016

Third quarter 2015/16 results
Year-end 2015/16 results
Ordinary General Meeting of the Shareholders for the year 2015/16
Dividend ex-date
Dividend payment date

For further information
Andrea Borla, CFO
Phone: +41 22 706 12 50
Email: investor@lem.com
38